CITATION: Tribe v Chief Commissioner of State Revenue [2006] NSWADT 62 DIVISION: General Division APPLICANT PARTIES: Brett Martin Tribe RESPONDENT Chief Commissioner of State Revenue FILE NUMBER: 053233 HEARING DATES: 18/10/2005 SUBMISSIONS CLOSED: 10/18/2005 DATE OF DECISION: 03/07/2006 BEFORE: Hole M - Judicial Member CATCHWORDS: first home owners grant - reversal of original decision - First Home Owners Grant Act - first home owners grant - reversal of original decision MATTER FOR DECISION: Principal matter LEGISLATION CITED : First Home Owners Grant Act 2000 Calcaro v Chief Commissioner of State Revenue [2004] NSW ADT 158 Mawad v Chief Commissioner of State Revenue [2005] NSWADT 207 McKenzie v Chief Commissioner of State Revenue [2005] NSWADT 214 CASES CITED: Scurry v Chief Commissioner of State Revenue [2006] NSW ADT 29 Snow v Chief Commissioner of State Revenue (No 2) [2005] NSW ADT 278 Tarak Adasi v Chief Commissioner of State Revenue (unreported) Taylor v Chief Commissioner of State Revenue [2004] NSWADT 36 APPLICANT In person REPRESENTATION: RESPONDENT S Free, Solicitor ORDERS: 1. The decision of the Chief Commissioner of State Revenue to recall the First Home Owners Grant is affirmed including the assessment of a 20% penalty. REASONS FOR DECISION 1 This application (053233) is in respect of a First Home Owners Grant ("the Grant") has been made concurrent with an application relating to the First Home Plus Scheme (056076) ("the Concession"). 2 The applicant purchased a property in Yamba ("the property"). The purchase was settled on 27 August 2003. The applicant applied for the Grant and the Concession at the time of purchase and they were granted. 3 The applicant and respondent agreed that the facts in respect of both the Grant and the Concession are the same. 4 At the time that the applicant purchased the property he was employed by the Roads and Traffic Authority and located in Grafton. He was renting a property at Yamba as his principal place of residence and the lease was due to expire at the beginning of February 2004. He considered breaking this lease so that he could move into the property, following enquiries he found that this was not an option. With advice from his financial advisor, his supervisor at work and his family he decided to rent the property out for six months (i.e. until February 2004) and then he could move in without payment of a penalty for breaking the lease. He did receive rental assistance from his employer. He would not have received any assistance towards breaking the lease or for occupying his own home (the property). 5 In August 2003 a lease of the property was entered into with an elderly lady for a period of six months. This lease was due to expire on 6 March 2004. The lessee was a relative of one of the applicant's work colleagues. 6 In February 2004 the applicant's employer moved him from Grafton to Taree for a period of between 6 and 9 months. He was moved again by his employer back to Grafton in late August 2004. The consequences of these moves included that the applicant's residence from February 2004 to late August 2004 was Taree (in a rented property at Old Bar) and then on return in late August 2004 it was in Grafton (not the property). The applicant was on a GRAD program and this required him to rotate through various locations. He sought a change in the relocation to Taree which was not granted by his employer. 7 At the time that the applicant returned to Grafton in August 2004, he believed that he could have terminated the lease (which the lessee was holding over on at that stage) with the frail old lady, however, on humanitarian grounds, he decided not to do so. The applicant then took a lease in Grafton, and then approximately 4 weeks later, the frail old lady moved in with her daughter so she could be cared for. This meant that the applicant was locked into a lease for 6 months and the property was vacant. The applicant considered his position and concluded that he was locked into his lease, he was living closer to his work and to Coffs Harbour (where there were specialists for treatment of Crohns disease which he has) and therefore the property should be re-let for a further term from October 2004. 8 The applicant noted, in his application to the Chief Commissioner of State Revenue to review the decision to require repayment of the Grant and Concession, that he was well informed about the First Home Owners Grant Scheme requirements and that prior to his work transfer he imagined that he would be able to fulfil the requirements. As the circumstances changed, the applicant appears not to have factored the residence requirements into his calculations. He did consider the merits of moving the frail old lady out of the house, however, he could not bring himself to do that and worried extensively about it, ultimately to his detriment he allowed her to stay. 9 On 15 March 2005, the applicant declared that he had not occupied the property within 12 months as required. This was in response to receipt of a Confirmation of Residency letter from the respondent. On 3 May 2005 the respondent wrote to the applicant advising that the Grant was to be repaid and imposing a penalty of 20%. On the same date the respondent wrote to the applicant noting that the Concession was withdrawn and enclosing an assessment of stamp duty and imposing interest of $235.90. 10 The applicant objected to the decision and assessment by letter dated 12 May 2005. In this letter the applicant noted: 'The purchase of the home was a stressful time and I had no real guidance in the process. I found a local Solicitor in Yamba, David Nelms and Associates and they looked after the conveyancing and First Home Owners Grant. I do remember signing the application. However, I did not receive a copy of my application nor information regarding notifying the Office of State Revenue should circumstances change in the first twelve months which to my understanding is why I have received a fine of $1,400. The application was in a bundle of documents I signed at my solicitor and in the confusion and speed of the transactions I was not given adequate time or instruction. I realise now that I should have asked for more clarification of the requirements and instructions.' 11 The applicant's objection was considered and refused by letter dated 22 June 2005. The applicant then filed 053233 on 11 July 2005 and 056076 on 14 July 2005. Requirements for Grant 12 Prior to amendments to the First Home Owner Grant Act 2000 which took effect as and from 1 January 2004, the relevant provision was: '12 Criterion 5 – Residence Requirements (1) An applicant for a first home owner grant must occupy the home to which the application relates as the applicant's principal place of residence within 12 months after completion or a longer period approved by the Chief Commissioner.' This suggests that the time may be extended on approval by the Chief Commissioner of State Revenue. Then subsection 20(3) provided that the Grant is paid in anticipation of compliance with the residence requirements: 'the payment is made on condition that, if the residence requirement is not complied with, the applicant must within 14 days after the end of the period allowed for compliance: (a) give written notice of that fact to the Chief Commissioner; and (b) repay the amount of the grant.' Requirements for Concession 13 Section 74(1) of the Duties Act 1997 provides: '(1) The agreement or transfer must be for the acquisition of a first home or for the acquisition of a vacant block of residential land intended to be used as the site of a first home.' and Section 76(1) provides: '(1) The home must be occupied or intended to be occupied by the person or persons who are acquiring it on or before settlement, or within 12 months after settlement, as the principal place of residence.' Submissions 14 The applicant submitted that he had every intention to move into the property as his residence in February 2004 although on the Application form the applicant disclosed 27 August 2003 as the date he expected to occupy and that due to the circumstances of his employment, the overlapping of the leases and his concern not to give notice to the tenant he had been unable to move into the property within the prescribed time. The applicant submitted that the imposition of a penalty, although he understood why it was imposed, was unfair. The applicant was unaware of the requirement to advise the Chief Commissioner of State Revenue within 14 days if he had not occupied the property prior to 28 August 2004. 15 The respondent submitted that in respect of the Grant and the Concession, the applicant had not satisfied the residence requirements. Further submissions were made canvassing the issue of whether the Chief Commissioner of State Revenue had a power to extend the period for compliance, even after the 12 months had ended, and the 14 day notice period. The consideration of this issue in Mawad v Chief Commissioner of State Revenue [2005] NSWADT 207 was compared to the consideration of the issue in Taylor v Chief Commissioner of State Revenue [2004] NSWADT 36 and in McKenzie v Chief Commissioner of State Revenue [2005] NSWADT 214 on the basis that: "31 … subsequent to the hearing in Mawad, O'Connor P held in McKenzie v Chief Commissioner of State Revenue that the Chief Commissioner has no power to extend the time period for compliance with the residence requirement after the expiry of that period. The ruling of O'Connor P was delivered ex tempore." and "32 The Chief Commissioner submits that the correct interpretation of the FHOG Act is that the Chief Commissioner has no power to retrospectively extend the time period for compliance with the residence requirement. Where a grant has been paid to an applicant in advance of the applicant complying with the residence requirement the payment is made in anticipation of the applicant complying with that requirement by occupying the property as their residence within 12 months of settlement. It is also a condition of the grant that if the residence requirement is not complied with the applicant must within 14 days after the end of the period allowed for compliance notify the Chief Commissioner of such non-compliance and repay the gran (s. 20(3)). Accordingly, if the 12 month period passes without the applicant having complied with the residence requirement or obtained an extension of the period allowed for compliance, the applicant becomes subject to a mandatory notification requirement and is liable to repay the grant. Moreover, such a person will have committed an offence (s. 20(4)). To interpret s. 12 as conferring on the Chief Commissioner the power to extend the time permitted for compliance with the residence requirement after the expiry of the 12 month period would be incompatible with the operation of s. 20, given the consequences (including criminal consequences) that are automatically triggered at the end of the 12 month period." 16 The respondent submitted that the imposition of a 20% penalty was consistent with previous cases requiring repayment of the Grant where the applicant was honest and had the initial intention to move into the property. In Calcaro v Chief Commissioner of State Revenue [2004] NSW ADT 158 P Molony JM considered at paragraph 62 the factors to be taken into account when the amount of a penalty was to be imposed. These issues were also referred to by J Needham JM in Tarak Adasi v Chief Commissioner of State Revenue (unreported). In this matter the applicant was honest and did have the initial intention to occupy the property, which was frustrated by his own financial circumstances. 17 Insofar as the imposition of interest on the repayment of the Concession is concerned, this would need to be calculated at the market rate together with the premium rate. The respondent conceded that in this case premium interest would not be charged and the market rate was 5.8%. 18 The respondent made submissions regarding the jurisdiction aspect of the application in respect of the Concession noting that this issue was subject of Snow v Chief Commissioner of State Revenue (No 2) [2005] NSW ADT 278 and Scurry v Chief Commissioner of State Revenue [2006] NSW ADT 29. Assessment 19 The applicant has not complied with the criteria requiring residence in the period of 12 months after completion of the purchase. The applicant was unaware of the facility to apply for an extension of this period. The reasons for the applicant being unable to comply with the 12 months residence requirement are based on his financial arrangements, particularly relating to rental assistance; his wish not to terminate the lease to his first tenant and his employment situation. The rental assistance provided by his employer and his leasing of an alternate accommodation have affected the applicant's consideration of his financial position, which led him to non-compliance with the residence requirement. The applicant's health guided him in part as to his relocation in Grafton, although at the date of hearing he now resides in the property at Yamba. The applicant has been honest and truthful with his information and with the provision of material to the respondent. 20 At the hearing the applicant drew attention to his part repayment of the Grant and the Concession. It became apparent that the respondent needed to ensure the assessment invoices were correctly calculated. 21 It is my opinion that the decision in Taylor and McKenzie ought to be followed and that there be no extension of the residence requirement beyond the provision of 12 months. 22 The penalty of 20% in respect of the Grant repayment is appropriate and is consistent with previous decisions in this Tribunal where the applicant had initially intended to reside in the property, had been precluded by unforeseen (financial) circumstances in occupying the property prior to expiry of the period, and he had been truthful in his dealing with the respondent and where he had the use of the money for close to 2 years. 23 The interest applied to the repayment of the Concession is in accordance with the provisions of the Duties Act 1997 for the same reasons set out in the previous paragraph. ORDER 1. The decision of the Chief Commissioner of State Revenue to recall the First Home Owners Grant is affirmed including the assessment of a 20% penalty. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.